A business manager, to assess the risk of a regional recession, needs to monitor the national economic stipple, the stipple of the most important industries in the state, as well as the internal growth cycle.
Although a regional economic cycle is not perfectly synchronized with its national counterpart, it tends to move up and down with the national economy. In addition to the broader national economy, two other factors influence a regional economy: the national cycle of its most important industries and its internal growth cycle associated with construction swings.
There are two different perspectives to consider in analyzing a regional economy: when a company sells into a distinct local market and when a company primarily produces in a local market and sells into a national or global market.
The business manager needs to know how similar the states economy is
to the national economy. A good way to do this is to look at the
similarity index to get a gage of where you state falls.
## Internal regional cycles While it is important to remember that
national economic cycles has a much larger impact on a business.
Regional cycles can have a much larger impact on specific industries. A
great example of this is how population growth stimulates the
construction industry. ## * What drives long-term regional growth? There
are multiple ways to drive economic growth, one such way is to create
good jobs that will attract people to the area. The other way to have
good jobs come to the area for the population growth. ## Economic policy
In reality the majority of economic policy has minimal impact the
majority of the time. However, economic policy can impact long term
growth, especially in state economies. ## * Economic Policy for Growth
The most impact way that governing bodies can impact growth is through
tax rates. This is not to say minimal taxes are always best if the
revenue generated from taxation is used to stimulate economic growth. ##
Production in a regional economy As a manager is important to realize
the impact of a economic cycles have on producers than sellers. ## A
regional early warning system A regional early warning system is similar
to the majority of many others, but with a for more specificity. This
can be done by monitoring industries important to the local economy.
Another great way to get a more accurate early warning system is to look
a state governments tax reveune.
+———————————+———————————————————————————————————————-+ | | indicators |
+=================================+======================================================================================================================+
| national economy | |
+———————————+———————————————————————————————————————-+ | national cycles
of the industry | national automobile sales for car dealers |
+———————————+———————————————————————————————————————-+ | local economy |
1. nonfarm payroll employment available for states, metropolitan areas,
and counties, | | | 2. personal income is more appropriate for
historical research for its time lag and frequent and radical revisions,
| | | 3. state income tax, especially withholding |
+———————————+———————————————————————————————————————-+ | population and
migration | housing permits, drivers licenses |
+———————————+———————————————————————————————————————-+ | consumer
spending | state sales tax: drill down to exclude construction materials
| +———————————+———————————————————————————————————————-+ | | |
+———————————+———————————————————————————————————————-+
Dealing with a regional downturn
| the local economy is similar to the national economy | the local economy is different from the national economy | |
|---|---|---|
| a company selling into the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
|
| a company only producing in the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
|
Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
The location quotient measures a region’s industrial specialization relative to a larger geographic unit ### Leakages (page 212) Tax leakage occurs when investors in a fund are forced to suffer withholding taxes on dividends from the underlying shares at a higher rate than would have applied if they had purchased those shares directly. ### Marginal Cost (page 219) Marginal cost is the cost added by producing one additional unit of a product or service. ## Economic events
Describe the characteristics of the following events briefly.
The case of what happened to Idaho in 1986 is a perfect example of what happens when a state tries to grow too fast. By expanding the construction sector so rapidly to accommodate the growth of the growing population. This caught up with them after their population started to decline and ended up and the impact to the construction industry led to an overall jump of 2% to the state unemployment. ### the case of Hawaii in the mid-1990s (page 215) The case of Hawaii in the 1990’s is a great example of how it is important to be aware of the local economy just as much as the national economy. While Hawaii is part of the United States its economy greatly relies on the success of Japan as the they make up the majority of tourist, Hawaii’s largest industry. This led to Hawaii falling into a recession in the mid 1990’s that mirrored that of Japan as Japanese citizens did not have the extra spending money to spend on vacations to Hawaii.